Pay Lump Sum off off Mortgage

[derwalsh]

Currently owe 203301 on our mortgage at 1.1% interest (Tracker) with 22 years left to go. House worth about 240K

Rang the bank and asked if we paid a lump sum of 50K off it and kept the repayments (833.84) the same how much would our term reduce.

They came back and said the term would be down to 16 years. They couldn't tell me the interest saved,

Based on my calcs it as follows:

266 * 833.84 = 221801

(194 * 833.84) + 50000 = 211765

Interest saved = 221801-211765 = 10036

50K currently sitting in prizebonds (reinvesting any winnings), have other savings also for rainy day.

What are peoples thoughts on paying this sum off the mortgage.

 

[luckystar]

Once you've no other debt then I'd pay it off the mortgage. Haven't looked at your calculations but if you're saving €10k that's a great saving

 

[skrooge]

Right now your prize bonds are earning you nothing. Given your mortgage rate is 1.1% my first thought was you'd be better off saving it and earning higher interest (in excess of 1.1%). However, DIRT being what it is paying off some of the mortgage would seem to be the sensible choice.

A quick look at the numbers and it is a nice savings. I would say at current rates you would save closer to €12,250 but that's a rough work out.

 

[derwalsh]

Currently prize bonds give approx 0.5% return, with the remote chance of a big win.

If I pay 50K into the mortgage, my 50K will be earning 10K over 22 years.

If i leave 50K in the prize bonds (Reinvesting the winnings) i will earn 5K over the 22 years.

Net gain of paying 50k off the mortgage is 5K or 220 euro a year over 22 years

Is that correct?